Rev. Rul. 65-235

The Internal Revenue Service, in administering section 337 of the Internal Revenue Code of 1954, will no longer contend that the date a closely-held corporation adopts a plan of complete liquidation is the date of adoption by the shareholders of a resolution authorizing distribution of the corporation's assets, under the circumstances set forth below.

In November shareholders owning 75 percent of the outstanding voting stock of a closely-held corporation agreed at an informal meeting that the corporation should sell all of its assets and distribute the proceeds in complete liquidation. Under local law, shareholders representing 66 2/3 percent of the corporation's voting stock had the power to approve a dissolution of the corporation.

Immediately after the meeting the board of directors resolved at a special meeting: (1) to accept an offer by another corporation to purchase all the assets, (2) to discontinue the corporation's business, and (3) to recommend dissolution of the corporation to the shareholders at their regular annual meeting to be held in the following January.

In December the board of directors sold all of the corporation's assets at a net gain. At the annual shareholders' meeting in January shareholders representing 100 percent of the outstanding voting stock passed a resolution authorizing distribution of all the corporation's assets, other than those retained to meet claims, in redemption of all its stock.

Under these circumstances, the Service will no longer contend that the nonrecognition provisions of section 337 of the Code are inapplicable on the ground that the plan of liquidation was not adopted until passage of the shareholders' resolution in January.

The Income Tax Regulations under section 337 of the Code will be amended to conform them to this position.

¹ Based on Technical Information Release 755, dated Aug. 16, 1965.